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Chapter 1

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Paul Iyogun

BU385 Chapter 1 –Introduction to Operations Management Week 1 Introduction -Operations management – the management of processes or systems that create goods and/or provide services -A system is a set of interrelated parts that must work together -Process – a series of linked actions, changes, or functions bringing about a result -There are three types of processes: core, support and managerial -Core or operational processes directly create goods and services -Support processes support core processes -Managerial processes govern the system -Activities performed by management that falls into operations management: -Forecasting -Capacity planning -Scheduling -Managing inventory -Assuring quality -Employee motivation and training -Location of facilities -Buying materials -Efficiency – operating at minimum cost and time -Effectiveness – achieving quality and responsiveness Why Study Operations Management? -A large percentage of a company’s expenses occur in the operations area -A large number of management jobs are in operations management -Activities in all of the other areas of business organizations are all interrelated with operations management activities Functions within Organizations -A typical organization has three basic functions: operations, finance, and marketing; these three functions must work together for a business to succeed Operations -The operations function performs all the activities DIRECTLY related to producing goods or providing services -The core of most organizations -It is responsible for the creation of an organization’s goods or services -The essence of the operations function is to add value during the transformation process -Value added – the difference between the cost of inputs and the value or price of outputs Finance -The finance function performs activities related to securing resources at favourable prices and allocating those resources throughout the organization -The necessary funding of operations and the amount and timing of funding can be important and even critical when funds are tight -Evaluation of alternative investments in plant and equipment requires inputs from both operations and finance people Marketing -Marketing is responsible for assessing customer wants and needs, and for communicating those needs and feedback to operations people and to product design people -Lead time – the time between ordering a good or service and receiving it BU385 Chapter 1 –Introduction to Operations Management Week 1 Other Functions -Accounting supplies information to management on costs of labour, materials, and overhead, and may provide reports on items such as scrap, downtime, and inventories -Management information systems (MIS) is concerned with providing management with the information it needs to effectively manage -Purchasing has responsibility for procurement of materials, supplies, equipment, and services -The personnel or human resources department is concerned with recruitment and training of personnel, labour relations, contract negotiations, wage and salary administration, and ensuring the health and safety of employees -Manufacturing engineering is responsible for design or purchase of the machines and equipment needed in the production processes -Maintenance is responsible for general upkeep and repair of equipment, buildings and groups -Logistics involves the transportation of raw material to the plan; storage; and transportation of goods to warehouses, retail outlets, or final customers The Scope of Operations Management -OMS is responsible for the creation of goods and services -A primary function of operations management is to guide the system by decision making -System design involves decisions that relate to product and service design, system capacity, he geographic location of facilities, arrangement of departments and placement of equipment within physical structures, and acquisition of equipment -Operational activities involve management of personnel, inventory planning, and control, production planning, scheduling, project management, and quality assurance Differentiating Production of Goods vs. Performance of Services -Production of goods results in a tangible output, such as an automobile, a building, etc. – anything we can see or to
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